Rsti Lasers
Image: Rofin-Sinar Technologies

Lasers have seen high demand lately, as new applications have emerged that allow a much wider array of industrial customers to make use of laser technology to boost productivity and make their operations more efficient. Rofin-Sinar Technologies (NASDAQ:RSTI) has been one of the companies seeking to cash in on the trend toward greater adoption of lasers, and coming into Thursday morning's fiscal third-quarter financial report, Rofin-Sinar investors were expecting solid gains in earnings despite flat sales. Rofin-Sinar actually saw its revenue decrease from year-ago levels, but what seemed to trouble investors the most was its lackluster guidance for the current quarter. Let's take a closer look at Rofin-Sinar's results and see if shareholders should be concerned about its long-term future.

Rofin-Sinar posts laser-hot earnings growth
Rofin-Sinar's fiscal third-quarter results once again showed different conditions on the top and bottom lines. Revenue eased down by 1.3% to $132.5 million, which was slightly less than the $134.3 million that investors had wanted to see. Yet Rofin-Sinar posted impressive gains on its bottom line, with net income soaring 78% and producing earnings of $0.41 per share, matching expectations and up from the $0.23 per share that it earned in last year's fiscal third quarter.

Trends among Rofin-Sinar's major business segments largely reversed course from the previous quarter. This time around, the marking and micro applications segment fared the best, with sales climbing 9% to $64.1 million. Yet on the macro applications side, declines of 14% weighed on Rofin-Sinar's overall performance. Component sales gains of 5% also helped offset the macro segment's losses, although components make up less than a sixth of Rofin-Sinar's total revenue.

In its worldwide sales, Rofin-Sinar saw some interesting results emerge. The U.S. market remained strong with sales climbing 10%, but most surprising was the bounce-back in Asian sales, which reversed a decline in the previous quarter to rise by 11%. Europe continued to struggle, with sales there falling 15%. On a constant-currency basis, though, adjusted revenue grew more than 9%, showing just how big an impact the strong U.S. dollar has had on results.

New CEO Thomas Merk characterized the company's results as "very strong." He pointed to improved profit margins as part of Rofin-Sinar's longer-term strategic plans, and highlighted "an excellent sales level in the solar industry and a strong medical device business" in fostering growth. With high-power fiber lasers and ultrashort pulse lasers contributing substantially to its overall growth, Rofin-Sinar thinks it can get back on track for growth in the near future.

What's next for Rofin-Sinar?
Looking forward, though, investors aren't certain about Rofin-Sinar's immediate prospects. The laser maker took a small step backward in terms of order entry and backlogs during the quarter, as order entry fell 10% from year-ago levels. That brought the backlog down to $157.5 million, slightly below where it was last quarter. Laser products remain the chief focus for customer orders going forward.

Moreover, Rofin-Sinar's guidance for the fiscal fourth quarter didn't match what investors had hoped to see from the company. Citing both currency concerns and the postponement of a project shipment to one of its customers in China, Rofin-Sinar said that sales would come in between $135 million to $140 million, which was considerably less than the $149 million consensus estimate among investors. Earnings per share in a range of $0.48 to $0.53 would also be disappointing compared to expectations for $0.55 per share.

In response to those numbers, Rofin-Sinar shareholders showed their nervousness, sending the shares down by more than 4% about halfway through the regular trading session following the announcement. Given the huge demand for lasers for an increasing number of applications, Rofin-Sinar's inability to find revenue growth is frustrating. And while its ability to boost margins has been impressive thus far, the laser maker needs to find more ways to increase its market share and penetrate the fast-growing laser industry more sharply.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Rofin-Sinar Technologies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.